Why Are These Stocks Deep in Red Today?

Although the three major indexes have each opened 1% higher, a number of stocks have lost ground in Tuesday intraday trading.

Among the losers today are Regulus Therapeutics Inc (NASDAQ:RGLS), Vista Gold Corp. (NYSEMKT:VGZ), Babcock & Wilcox Enterprises Inc (NYSE:BW), Barrick Gold Corporation (USA) (NYSE:ABX), and COMSCORE, Inc. (NASDAQ:SCOR). In this article, we analyze why traders are selling and see how the funds in our database are positioned towards them.

Hedge fund sentiment is an important metric for assessing the long-term profitability. At Insider Monkey, we track over 700 hedge funds, whose quarterly 13F filings we analyze and determine their collective sentiment towards several thousand stocks. However, our research has shown that the best strategy is to follow hedge funds into their small-cap picks. This approach can allow monthly returns of nearly 95 basis points above the market, as we determined through extensive backtests covering the period between 1999 and 2012 (see the details here).

Regulus’ RG-101 on Clinical Hold

Regulus Therapeutics Inc (NASDAQ:RGLS) shares have fallen almost 50% after the FDA verbally notified the biotech that its IND for lead drug candidate RG-101 has been placed on full clinical hold. The FDA put the IND on hold after Regulus reported a second serious adverse event of jaundice. RG-101 is a potential drug candidate for the treatment of chronic hepatitis C virus. Of the 766 funds we track, 14 funds owned $24.95 million worth of Regulus Therapeutics Inc (NASDAQ:RGLS)’s stock, which accounted for 6.80% of the float on March 31, versus 13 funds and $47.35 million, respectively, on December 31.

Babcock & Wilcox Trims Guidance

Babcock & Wilcox Enterprises Inc (NYSE:BW) shares are 21% lower after the company cut its fiscal 2016 adjusted EPS guidance to $0.63-$0.83 from $1.25-$1.45. Analysts were expecting $1.38 per share on sales of $1.8 billion. One reason for the lower EPS guidance is that Babcock will proactively restructure its power business to adjust for lower U.S. coal generation. The company will eliminate over 200 positions in North America immediately and undertake other cost saving measures to make its coal business more efficient and cost competitive. Another reason for the lower guidance is a charge to correct an engineering design error for a new build renewable energy plant in Europe.  The number of funds in our database with holdings in Babcock & Wilcox Enterprises Inc (NYSE:BW) rose by four quarter-over-quarter to 26 at the end of March.

On the next page, we find out why traders are selling Vista Gold, Barrick Gold Corporation (USA), and COMSCORE Inc.
Gold Miners Off on Profit Taking

Vista Gold Corp. (NYSEMKT:VGZ) and Barrick Gold Corporation (USA) (NYSE:ABX) are off by 5% and 1.5% respectively due to lower gold futures prices and profit taking. Given the surge in gold miner shares since Britain’s decision to leave the EU last Thursday, many traders are taking some money off the table to preserve their gains. Although the Brexit will have a negative effect on global growth and could cause substantial black swan events, many traders are uncertain what central banks around the world will do. If the Fed decides to raise rates in December or later, gold prices could still decline. In addition, the British government could potentially work out a deal with the EU so that the country has access to the region’s ‘one market’ and still retain some sovereignty over its immigration policies. If that happens, the ‘risk-off’ sentiment could reverse. Three funds tracked by us owned shares of Vista Gold Corp. (NYSEMKT:VGZ) and 49 top funds were long Barrick Gold Corporation (USA) (NYSE:ABX) at the end of the first quarter.

COMSCORE Audit Review Takes Longer Than Expected

COMSCORE, Inc. (NASDAQ:SCOR) is 19% in the red today after the company disclosed in a regulatory filing that its audit committee and board of directors require more time to evaluate the information collected concerning potential accounting matters. The accounting matters have delayed the company’s annual report and quarterly report to the SEC. The company originally said that it would provide an informed update by June 27, which traders took as the deadline that COMSCORE would issue a conclusive report over its accounting matters. Apparently the actual deadline is later than that. At the end of March, 22 funds tracked by us had a long position in COMSCORE, Inc. (NASDAQ:SCOR) at the end of March, up by one from the previous quarter.

Disclosure: none